Where-to-play choices occur across a number of domains, notably these:

• Geography. In what countries or regions will you seek to compete?

• Product type. What kinds of products and services will you offer?

• Consumer segment. What groups of consumers will you target? In which price tier?

Meeting which consumer needs?

• Distribution channel. How will you reach your customers? What channels will you use?

• Vertical stage of production. In what stages of production will you engage? Where along the value chain? How broadly or narrowly?

Inevitably, the significance of each dimension of the where-to-play choice will vary by context. Each dimension must be considered thoughtfully and will hold different weight in different situations. A start-up might focus first on the products or services to be offered. A stagnating giant might focus on customers—looking for a deeper understanding of needs

and new ways to approach segmentation—to narrow and refine an overly broad where-to-

play choice.

The first component of the strategy logic flow is industry analysis. To determine where to play, you must assess the industry landscape. You must ask, what might be the distinct segments of the industry in question (geographically, by consumer preference, by distribution channel, etc.)? Which segmentation scheme makes the most sense for the given industry today, and what might make sense in the future? And what is the relative attractiveness of those segments, now and in the future?

STRATEGY LOGIC FLOW DOS AND DON’TS:

• Do explore all four critical dimensions of strategy choice: industry, customers, relative position, and competition.

• Do look beyond your current understanding of the industry, pushing to generate new ways of segmenting the market.

• Don’t accept that entire industries are or must be unattractive; explore the drivers of

different dynamics in different segments, and ask how the game could be changed.

• Do consider both channel and end consumer value equations; if only one of these constituents is happy, your strategy is a fragile one. A winning strategy is a win-win-win; it creates value for consumers, customers, and the company.

• Don’t expect either the channel or the end consumers to tell you what constitutes value;

that is your job to figure out.

• Don’t be blasé about your relative capabilities or costs; compare them with those of your

best competition, and really push to understand how you can win against them.

• Do explore a range of possible competitive reactions to your choices, and ask under what conditions competitors could block you from winning.

We have come to describe the way most companies segment their customers as marketing segments — the buckets used to identify and communicate with different kinds of customers. We call the classifying of customers by service priorities operating segments. The vertical axis created in an attribute map can be thought of as an operating segment. The goal of the diagnostic stage is to reveal all the different operating segments — that is, all the different orderings of attributes that you are currently serving.